Mexican Stand Off And Leapfrogging

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There is a lot more to the sellers asking price vs price people are able/willing to pay stand off than just bloody minded greed. I was speaking to a mate yesterday. He bought in Hove in 2006. He tried to sell his flat last year and this year and only got offers way below the value of his mortgage (95% of the price he paid for it 2006). He is selling because he wants to move to a bigger place as he has a kid now. Basically he has given up...he cannot move, he cannot sell, he is stuck. This I suspect is one of the biggest reasons why we see Rightmove prices not budging, and we are seeing less properties coming on the market. Basically these people are stuck in their 2 bed flats until either the market recovers (2006 prices by 2020 anyone?) or they pay down enough of their mortgage to get out, or they get repossessed.

To leapfrogging:

There are hundreds of thousands, if not millions in this position, removing properties from the low end of the market, but also removing competition for the next step on 'The Ladder'. What this means is that most people on this site, who have reasonable deposits, should be able to leapfrog these people and get that semi in the burbs instead of a grotty flat as their first home. It's an ill wind.

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Certainly the top end is getting hit the hardest. Heard a story the other day about a long lost acquaintance who did well for himself. Just moved to the midlands and bought a huge house with 85 acres of farmland (rented out) for £1.4m. Same house was originally on the market for £2.5m. Not saying its the bottom but 40% off isn't bad.

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What this means is that most people on this site, who have reasonable deposits, should be able to leapfrog these people and get that semi in the burbs instead of a grotty flat as their first home. It's an ill wind.

You've got it in one! Staying out of the bubble will have given me a great boost in my quality of life.

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There is a lot more to the sellers asking price vs price people are able/willing to pay stand off than just bloody minded greed. I was speaking to a mate yesterday. He bought in Hove in 2006. He tried to sell his flat last year and this year and only got offers way below the value of his mortgage (95% of the price he paid for it 2006). He is selling because he wants to move to a bigger place as he has a kid now. Basically he has given up...he cannot move, he cannot sell, he is stuck. This I suspect is one of the biggest reasons why we see Rightmove prices not budging, and we are seeing less properties coming on the market. Basically these people are stuck in their 2 bed flats until either the market recovers (2006 prices by 2020 anyone?) or they pay down enough of their mortgage to get out, or they get repossessed.

To leapfrogging:

There are hundreds of thousands, if not millions in this position, removing properties from the low end of the market, but also removing competition for the next step on 'The Ladder'. What this means is that most people on this site, who have reasonable deposits, should be able to leapfrog these people and get that semi in the burbs instead of a grotty flat as their first home. It's an ill wind.

its already eneded. with a total collapse of the financial and perhaps social welfare of our society.

we all knew this boom was rank. but they ran with it and have fleeced a generation and tied another to impossible to repay debt. this only ends one way.

utter disaster.

we have NOTHING left in or economic kitty but printing money. its gone beyond pathetic.

and 60% of the population and 90% of the elected and the media are to blame.

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I love the fact that you can blame just one individual for pretty much the whole mess!!

From regutation of the financial sector to encouraging a sentiment of personal greed in the populace through taxation policy. All roads of blame pretty much eventually lead to him. You've gotta hand it to the guy - you have to be a special breed of C**t to F**K up THAT big!

Edited May 26, 2009 by sbn

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This is the big change that this crash will bring to our society .. The "trapped" generation the young people who bought in 2006 and 2007 who will never be able to move .. even in a benign scenario where prices only fall 50% from peak and assuming a 2% rise with inflation it will be 35 years before someone with a 100% mortgage is out of negative equity (in reality it's 25 years because of the mortgage) .

How many of these people exist ? How will it pan out for them ? What will they do ? This is one of the reasons everyone HAS to believe in a quick recovery to 2007 prices .. because otherwise it's goodnight Vienna. As long as you didn't liar loan the best thing to do right now would be to return the keys to the building society chuck in your job and hang out at your parents house until your house is repo'd and sold and then go bankrupt. The longer they leave it the harder that will be to do ..

In 25 years time we could see couples who have spent all their working life living in a one bed starter home, because they will be able to move .. and yet people who are five years younger will have rented very cheaply for the first five years of their working life and then "Leapfrogged" and bought the family home as first time buyers ..

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Certainly the top end is getting hit the hardest. Heard a story the other day about a long lost acquaintance who did well for himself. Just moved to the midlands and bought a huge house with 85 acres of farmland (rented out) for £1.4m. Same house was originally on the market for £2.5m. Not saying its the bottom but 40% off isn't bad.

This is my view as well.

As people can't move up, those who will ultimately get hit the worst are those selling the more expensive types of house.

I see huges glut of house for £1.5m-3m in my area and none are selling or are likely to sell. I created a chart over a year ago showing there was 6 years worth inventory for houses listed at over £1m in Surrey. At the time a few people scoffed as they argued that back in 2000-2003 there were fewer £1m homes and so of course there were fewer transactions over £1m, in essence suggesting that my average annualised figure for the number of £1m plus sale figure for the number of sales over £1m in a year was therefore skewed to low. Of course, as we now know the income multiple dynamics are again more like 2000-3 and so the number of sales over £1m will of course plunge.

Edited May 26, 2009 by mikelivingstone

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This is the big change that this crash will bring to our society .. The "trapped" generation the young people who bought in 2006 and 2007 who will never be able to move .. even in a benign scenario where prices only fall 50% from peak and assuming a 2% rise with inflation it will be 35 years before someone with a 100% mortgage is out of negative equity (in reality it's 25 years because of the mortgage) .

How many of these people exist ? How will it pan out for them ? What will they do ? This is one of the reasons everyone HAS to believe in a quick recovery to 2007 prices .. because otherwise it's goodnight Vienna. As long as you didn't liar loan the best thing to do right now would be to return the keys to the building society chuck in your job and hang out at your parents house until your house is repo'd and sold and then go bankrupt. The longer they leave it the harder that will be to do ..

In 25 years time we could see couples who have spent all their working life living in a one bed starter home, because they will be able to move .. and yet people who are five years younger will have rented very cheaply for the first five years of their working life and then "Leapfrogged" and bought the family home as first time buyers ..

And it is not just about being unable to cover the outstanding mortgage when you sell.

You need money for fees and stamp duty and the deposit on the next house and you need to qualify for a bigger mortgage.

If you are on an IO mortgage, you aren't even paying off the pitiful amount of capital in the first few years that you manage to pay off with a repayment mortgage.

Of course some people might be getting a big pay rise that will help overcome these obstacles. Plus an inheritance or help from parents. But that is a small part of the market in normal times.

(small edit for clarity)

Edited May 26, 2009 by bobthe~

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I hear its the same in a lot of other places.... buyers won't buy, sellers can't sell..... equally therefore chains do not work very well if at all... the whole system is jammed even before you take financing into account.

it's similar in spain so I hear.

meanwhile the stats which I don't trust one little bit show prices falling and falling.... they'd be more honest if when asked how much prices had fallen they were to respond "who knows"..... it's now pretty much impossible to get any reliable information on what a house might be worth.... now more than ever the answer is what you are willing to pay, but as always that won't secure a sale unless the seller agrees.

I bought last year (begining) for an early 2005 price ( I know becasue its what it actually sold for then)... I will have nominally lost out... but I'm not worried as wanted to buy, and if I tried now I really doubt I'd find anything as I keep an eye out and there doesn't appear to be anything suitable on the market at all, at any price ( 4 bed cottage in about an acre).

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This is the big change that this crash will bring to our society .. The "trapped" generation the young people who bought in 2006 and 2007 who will never be able to move .. even in a benign scenario where prices only fall 50% from peak and assuming a 2% rise with inflation it will be 35 years before someone with a 100% mortgage is out of negative equity (in reality it's 25 years because of the mortgage) .

How many of these people exist ? How will it pan out for them ? What will they do ? This is one of the reasons everyone HAS to believe in a quick recovery to 2007 prices .. because otherwise it's goodnight Vienna. As long as you didn't liar loan the best thing to do right now would be to return the keys to the building society chuck in your job and hang out at your parents house until your house is repo'd and sold and then go bankrupt. The longer they leave it the harder that will be to do ..

In 25 years time we could see couples who have spent all their working life living in a one bed starter home, because they will be able to move .. and yet people who are five years younger will have rented very cheaply for the first five years of their working life and then "Leapfrogged" and bought the family home as first time buyers ..

There is just no way that people are going to keep paying debt on their house when it becomes obvious that there is no way it can ever increase in value. The serfdom of the last few years is over, as someone on here said recently, you can just feel that the media, parliament and VI`s in general have lost their authority. I think it`s all to the good, people need to now just stop all payments to the banks and the authorities and start working together at the person to person level.

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meanwhile the stats which I don't trust one little bit show prices falling and falling.... they'd be more honest if when asked how much prices had fallen they were to respond "who knows"..... it's now pretty much impossible to get any reliable information on what a house might be worth.... now more than ever the answer is what you are willing to pay, but as always that won't secure a sale unless the seller agrees.

nope! bank valuations are based on Nationwide/Halifax indexes ...

and the bank valuations will determine the future house prices ...

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There is just no way that people are going to keep paying debt on their house when it becomes obvious that there is no way it can ever increase in value. The serfdom of the last few years is over, as someone on here said recently, you can just feel that the media, parliament and VI`s in general have lost their authority. I think it`s all to the good, people need to now just stop all payments to the banks and the authorities and start working together at the person to person level.

I have thought about this, and that wouldn't be great for us renters, but it is the only way out of this mess...zero the system and start again. If they wee to do it though, they would have to say that wherever you are is your own home, np landlords, no mortgage companies.

How would that effect the economy? Once we've established a new way of making payment for labour and goods, then there will be shed loads more to go around on productivity.

The sellers can't sell and the buyers can't buy. I don't see either condition going away soon, increasing unemployment may be the only thing but that could take another year.

There doesn't seem to be many forced sellers, I've seen a few ways the standoff is being resolved in the area I am looking at.

- Repossession (very few)

- Renting out a house that won't sell (common)

- Selling a new build at a large discount (few)

One probate place I like is just not dropping after nearly a year on the market.

VMR.

Another 'biggie' is the amount of homes left empty after deceased is carted off.

Approx 450.000 houses, bungalows, flats left empty per annum.

We are 2 yrs in after everything more or less stopped, I don't know how they are hiding a MILLION empty properties!

The longer they artificially keep HP's up (& we all know how 'they' manipulate the most expensive purchase most will ever make in their lives) - adds another half million a year to completely flatten prices.